The executive board of the International Monetary Fund (IMF) said it has successfully completed the combined sixth review of Serbia’s economic performance under the Stand-By Arrangement (SBA), making available the cumulative amount of 850.8 million euro ($890 million) to the country.
The Serbian authorities have indicated their intention to continue treating the arrangement as precautionary, the IMF said in a statement late on Friday.
“The Fund-supported programme is delivering positive results, underpinning macroeconomic management and structural reforms in Serbia. The economy continues to strengthen, supported by the authorities’ efforts to improve public finances, address structural weaknesses, and strengthen the financial sector. Employment is rising, inflation remains firmly under control, and public debt has started to decline. Full implementation and strong ownership of the reform agenda are critical to consolidate hard-won gains, improve the business climate, and support Serbia’s medium-term growth”, Tao Zhang, deputy managing director and acting chair, said in the statement.
The reduction in the inflation target reflects improved macroeconomic fundamentals and market confidence. The lower target should support the “dinarisation” strategy and help reduce long-term interest rates. Financial sector reforms have strengthened the resilience of the sector. The strategy for resolving nonperforming loans has helped reduce the overall bad loan ratio, and the authorities remain committed to its full implementation, especially with respect to state-owned banks, Zhang added.
Zhang recommended further efforts to minimise fiscal risks through a restructuring of unviable state-owned enterprises, especially in the mining, energy, and transportation sectors, while enhancing social safety nets. Moreover, he explained that priorities for Serbia include eliminating domestic arrears, reforming the public administration and wage system, and strengthening public investment management.
“Serbia has achieved notable improvement in the business environment, but more needs to be done to boost investor confidence and medium-term potential growth. Particular efforts should be made to improve the court system, strengthen the quality of the judiciary process, and facilitate the use of effective out-of-court arbitration,” Zheng said.
In February 2015, the IMF approved a 36-month, 1.2 billion euro SBA that aims to help Serbia restore public finances’ health, increase the stability and resilience of the financial sector and implement comprehensive structural reforms.
